NEXTMART, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE

QUARTERLY PERIOD ENDED March 31,June 30, 2010

Table of Contents

INDEX

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ITEM 1. FINANCIAL STATEMENTS

See notes to consolidated financial statements.

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5

See notes to consolidated financial statements.  

6

3

7

4

See notes to consolidated financial statements.

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5

NEXTMART, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations.

On March 3, 2010, Next Mart, Inc. (herein referred to as “NextMart” or the “Company”), entered into a transaction termination agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”), wherein both companies agreed to terminate and rescind the subscription and asset sale agreement previously entered into by the parties on August 1, 2009 (the “Original Agreement”). All considerations received by each party under the Original Agreement were returned to the issuing party.

On March 31, 2010, NextMart, Inc. (“NextMart” or “Company”) entered into an asset exchangeAsset Exchange and subscription agreement (the “Agreement”)Subscription Agreement with Miss Wang Yihan and Beijing Chinese Art Exposition's Media Co., Ltd. (“CIGE”), a leading Chinese art services, events, and media company located in Beijing, China. CIGE’s main business operations includes operating and managing the China International Gallery Exposition, the largest exhibition of art galleries in China, and operating and managing China’s “Gallery Guide” magazine, a monthly magazine featuring news and events targeting top Chinese art collectors and galleries with a monthly distribution rate of over 10,000 copies. Ms. Wang Yihan is the owner of 100% of CIGE and is the President of our Company. The Agreementagreement was disclosed in our Form 8-K filed on March 31, 2010. Subsequentlyamended on May 10, 2010 NextMart, Beijing Chinese Art Exposition Media Co. Ltd., a PRC company (“CIGE”), and Miss Wang Yihan, the controlling sharehold er of CIGE, agreed to amend the Agreement. The amendment was madebut effective as of March 31, 2010.

Under the terms of the amended agreement NextMart agreed to sell directly to Ms. Wang the following assets:assets (“Transferred Assets”) (”see NOTE 9 HELD FOR SALE OPERATIONS): 1) 100% of the shares of William Brand Administer Ltd, a BVI registered company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and a wholly owned subsidiary of NextMart; 2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu ExhibitionEx hibition Ltd., a PRC registered company; 4) the net assets of NextMart’s 100% owned subsidiary Cancer Institute of ChinaSun New Media Group Ltd. (a BVI registered company) and its 100% owned subsidiary China Cancer Institute Ltd. (a PRC registered company). and 5) certain other miscellaneous non material assets. The net assets being sold do not includeTransferred Assets excluded cash in the subsidiaries, cash,certain office furniture and equipment and third party creditor’s rights and third party debts, which shall remain the subsidiary’s property; 5) any other net assets and liabilities belonging to NextMart, with the exception of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining US$750,000 liability under the convertible bond settlement agreement.certain securities.

The parties placed a valuation of $5,391,255 onAbout the above described assets, which amount is based on a third party valuation report of the assets prepared as of March 31, 2010. As consideration for the transfer of the above described assets,Transferred Assets, Ms. Wang agreed to transfer to NextMart within 24 months from date of the amended agreement certain land usage rights for commercial real estate property valued at no less than $5,390,000.within 24 months from date of the amended agreement. The value of the land use rights will be determined by an appraisal conducted by a licensed third party appraiser acceptable to both parties. In the PRC, there is no private land ownership in the PRC.ownership. Rather, land in the PRC is owned by the government and cannot be sold to any individual or entity. Instead, theThe government grants or allocates landholders a “land use right,” which is sometimes referred to informally as land ownership. Land use rights are granted for specific purposes and for limited periods. Each period may be renewed at the expiration of t hethe initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.

In the event Ms. Wang fails to provide land usage rights for adequate real estate propertyprope rty within the 24 month period, she is obligated to

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provide NextMart with tangible assetsequivalent common stock of a publicly traded company acceptable to NextMart which shall have a value of no less than $5,390,000.NextMart.

Additionally, underOn June 22, 2010, the Company entered into an asset acquisition agreement (the “Acquisition Agreement”) with CIGE and Ms. Wang Yihan, the sole owner and director of CIGE who is also our Chairman and CEO. Under the terms of the amended agreement, (i) CIGE will not transfer to NXMR ownership of its member database and the advertising sales rights for its CIGE art exposition events or Gallery Guide magazine, (ii),Acquisition Agreement, NextMart will not issue toacquired from CIGE the stock purchase warrantsbelow described Assets for 50,000,000an agreed price of $750,000 (the “Consideration”). NextMart agreed to pay the Consideration by issuing to Ms. Wang Yihan 75,000,000 shares of its common stock,stock. As a result of this transaction, Ms. Wang will become NextMart’s second largest shareholder with a 27.96% ownership of the company.

Under the terms of the Acquisition Agreement, CIGE sold to NextMart the following assets (the “Assets”):

1)

 ownership of CIGE’s 10,000 member consumer database,

2)

 exclusive ownership of all advertising space for every art exhibition event held by CIGE in greater China (including Hong Kong and (iii)Macao, and Taiwan) for the next 30 years, and

3)

 exclusive ownership of the "Gallery Guide" brand name and all gross revenues generated by the magazine publication for the next 30 years, including but not limited to advertising revenue and sponsorship revenue.

The agreement further provides that if for any reason or under any circumstance during the next 30 years CIGE ceases holding any of its exhibitions or ceases publishing the Gallery Guide, NXMR shall have the right to buy those exhibitions and “Gallery Guide” brand name for the price of first refusal originally granted to NexMart has been rescinded. Separately, CIGE and SMIH and Redrock have agreed that SIMH and Redrock will not be transferring 8,775,086 and 65,386,214 shares of the Company’s common stock held by such parties, respectively, to CIGE as reported in the original Form 8-K.$1 each from CIGE.

As a result, of these transactions, NextMart’s current business operations consists of developing,1) the sale of marketing solutions through our art events and art media marketing channels, and 2) the design and marketing of art-themed products lines for existing luxury and high-end goods and services, and art themed real estate developments.

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On June 22, 2010, NextMart also entered into a strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company’s major shareholder Redrock Capital Venture Ltd. (“Redrock”).

Under the Strategic Agreement, Redrock Land will provide NextMart a $1,000,000 interest free, unsecured loan. The loan is due on demand any time after the first anniversary of the loan. As of the date of this report, the loan has not been provided to the Company. Redrock Land also has agreed that within the next 24 months, it will partner with NextMart on three of its real estate development projects that will be art related.  For each such project, NextMart will act as the project’s concept, marketing, and selling high endsales consultant (see below for details on the Company’s planned Real Estate Marketing and Sales business). Redrock Land is a PRC registered company engaged in land investment and development in China. The company typically co-invests with real estate developers to acquire land and launch development projects. As part of its cooperation with NextMart, Redrock Land will secure land and developing partners for thr ee art productsrelated developments that NextMart will supply paid consulting service. SMIH has agreed to provide NextMart with approximately $6,000,000 worth of advertising space over the next five years in various media outlets owned by it or its affiliates. The $6,000,000 worth of advertising space will be allocated to NextMart such that every year for 5 succeeding years NextMart will have access to $1,200,000 in advertising space in various print magazines and co-branded art-themed luxuryonline websites and e-magazines owned by SMIH or its affiliates. Such advertising space will be subject to availability and market prices, and the Company intends to limit the use of the advertising space to market its Artslux products. The Company has undertaken its art themed product sales business under a newly created “Artslux” brand and we will create and/or sell high end art products and co-branded art-themed luxury products by developing partnerships with well known artists and luxury goods producers.

Basis of Consolidation and Presentation

The accompanying unaudited consolidated financial statements of Nextmart, Inc. (the “Company”) and its subsidiaries and variable interest entities or VIEs have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. All significant inter-company accounts and transactions have been eliminated. Investments in entities in which the Company can exercise significant influence, but which are less than majority owned and not otherwise controlled by the Company, are accounted for under the equity method. The Company has adopted FASB Interpretation No.46R consolidationASC No. 810consolidation of Variable Interest Entities, FIN 46R, an Interpretation of Accounting Research Bulletin No.51. FIN 46REntities. ASC No. 810 requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIE’s residual returns. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United StatesSt ates of America.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of consolidated financial position as of March 31,June 30, 2010, and consolidated results of operations, and cash flows for the three month periods and sixnine months periods ended March 31,June 30, 2010 and 2009, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses for the periods that the financial statements are prepared. Actual amounts could differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Financial instruments

The Company’s financial instruments include cash and cash equivalents, other receivable, other payable and marketable securities. The

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fair values of these financial instruments approximate their carrying values due to the short-term maturity of the instruments.

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Impairment of Long-lived Assets

The Company assesses the carrying value of long-lived assets in accordance with ASC No 360 (formerly SFAS No.144 (ASC No. 360)No.144), accounting for the Impairment or Disposal of Long-lived Assets. Factors considered important which could trigger this review include a significant decrease in operating results, a significant change in its use of assets, competitive factors, strategy of its business, and significant negative industry or economic trends. The company cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on the reported asset values. Such events may include strategic decisions made in response to the economic conditions relative to product lines, operations and the impact of the economic environment on our customer base.  When the Company determines that the carrying value of long-lived assets may not be recoverable based on as assessment of future cash flows from the use of those assets, an impairment chargechar ge to record the assets at fair value may be recorded. Impairment is measured based on fair values utilizing estimated discounted cash flow, published third-party sources, and third-party offers.

Comprehensive Income (Loss)

The Company reports comprehensive income (loss) in accordance with ASC No. 220 (formerly FASB No. 130 (ASC No. 220)130), “Reporting Comprehensive Income (Loss)”. The comprehensive loss for the Company includes currency translation adjustments and unrealized loss on marketable securities.

Recently Issued Accounting Pronouncements Affecting the Company

In October 2009, the Financial Accounting Standards Board (FASB) issued amended revenue recognition guidance for arrangements with multiple deliverables (ASU No. 2009-13) (ASC No. 605). The new guidance eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third-party evidence (TPE) is unavailable. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued guidance which amends the scope of existing software revenue recognition accounting (ASU No. 2009-14) (ASC No. 985). Tangible products containing software components and non-software components that function together to deliver the product’s essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not ex pectexpect a material impact on the Consolidated Financial Statements.

In September 2009, the FASB issued amended guidance concerning fair value measurements of investments in certain entities that calculate net asset value per share (or its equivalent) (ASU No. 2009-12) (ASC No. 820). If fair value is not readily determinable, the amended guidance permits, as a practical expedient, a reporting entity to measure the fair value of an investment using the net asset value per share (or its equivalent) provided by the investee without further adjustment. The amendments are effective for interim and annual

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periods ending after December 15, 2009. The Company does not expect a material impact on the Consolidated Financial Statements due to the adoption of this amended guidance.

In August 2009, the FASB issued guidance on the measurement of liabilities at fair value (ASU No. 2009-5) (ASC No. 820). The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. The Company adopted this guidance in the year ended November 30, 2009 and there was no material impact on the Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2009-02. “Amendments to Various Topics for Technical corrections.” ASU No. 2009-2 is an omnibus update that is effective for financial statements issued for interim and annual periods ending after July 1, 2009. This Statement did not impact the Company’s Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168 (ASC No. 105), “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (the Codification). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this Statement for its year ended November 30 , 2009. There was no change to the Company’s Consolidated Financial Statements due to the implementation of this Statement.

In June 2009, the FASB issued SFAS No. 167 (ASC No. 810), “Amendments to FASB Interpretation No. 46(R),” and SFAS No. 166 (ASC No. 860), “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (ASC No. 860).” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The Company will adopt these Statements for interim and annual reporting periods beginning on January 1, 2010. The Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165 (ASC No. 855), “Subsequent Events.” This Statement sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009. The Company adopted this Statement in the year ended November 30, 2009. This Statement did not impact the consolidated financial results.

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Property, Plant and equipment

Property, Plant and equipment are stated at cost, net of accumulated depreciation.  Depreciation is computed primarily on the straight-line method for financial reporting purposes over the following estimated useful lives:

Revenue recognition

We generate revenue through the provision of consulting services. We recognize revenues from consulting services in accordance with StaffASC No. 605 (Staff Accounting Bulletin (“SAB”) No. 104 (ASC No. 605),104) “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of providing consulting services; or

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services have been rendered; the Company’s consulting fee received from the clients is fixed or determinable pursuant to the terms of the consulting agreement and these amounts appear to be collectible.

Cost of revenues

Cost of revenues includes salary and other related costs for our management services and technical support staff, as well as third-party contractor expenses.  Additionally cost of revenues includes fees for hosting facilities, bandwidth costs, and equipment and related depreciation costs. Cost of revenues will vary significantly from period to period depending on the level of management services provided.

Trade receivables and allowances for Doubtful Accounts

The Company performs ongoing credit evaluations of its customers to minimize credit risk. The allowance for doubtful accounts is based on management’s estimates of the collectability of its accounts receivable after analyzing historical bad debts, customer concentrations, customer credit worthiness, and current economic trends. Specifically, the Company reviews the aged accounts receivables listing for balances that are specifically identifiable as credit risks or uncollectible, and may use its judgment for calculation of allowances for doubtful accounts.

Earnings (loss) per share

Basic earnings (loss) per share includes no dilution and is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the year. As the Company has a loss, presenting diluted net loss per share is considered anti-dilutive and not included in the statement of operations.  

Foreign currency translation

The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards

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(“SFAS”)ASC No. 52 (ASC830 ( formerly SFAS No. 830)52), “Foreign Currency Translation”, since the functional currency of the Company is Renminbi (RMB), the foreign currency financial statements of the Company’s subsidiaries are re-measured into U.S. dollars (USD). Monetary assets and liabilities are translated using the foreign rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders’ equity accounts and capital asset accounts are translated by using historical exchange rates. Any translation gain or loss incurred is reported in the consolidated statement of operations. In this period, we used 6.83603 RMB per USD for the weighted average rate, and we used 6.83726.8086 RMB per USD as the balance sheet date rate (March 31,(June 30, 2010).

Income taxes

The Company follows the liability method of accounting for income taxes in accordance withwithASC No. 740(formerly SFAS No. 109 (ASC No. 740)109). Under this method, future tax assets and liabilities are recognized for the future tax consequences attributableattributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Future tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. The tax loss arising from PRC can be carried forward for five years. Agreed tax losses by respective local tax authorities can be offset against future taxable profits of the respective companies. A valuation allowance is provided for deferred tax assets if it is more likely than not that the Company will not realize the future benefit, or if the future deductibility is uncertain.

Stock-based compensation

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 (ASC No. 505) and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

Related Parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions.  Parties are also considered to be related if they are subject to common control or common significant influence.

Deferred Charges

Payments made for future expenses are amortized over the life of service received.

.

Convertible Notes and Notes Issued with Stock Warrants

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The Company accounts for convertible notes and notes issued with stock warrants in accordance with ASC 470-20 (formerly APB No. 14,14), Accounting for

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Convertible Debt and Debt Issued with Stock Purchase Warrants. The proceeds from the issuance of convertible notes are allocated between the debt and the equity. The Company booked a discount on convertible notes for the conversion feature of the notes and warrants and is amortizing the discount over the life of the debt.

Reclassification

The comparative figures have been reclassified to conform to current period presentation.

NOTE 2 – MARKETABLE SECURITIES

Marketable securities are considered as available for sale and are recorded at market value. The marketable securities are summarized as follow:

The 3,000 shares of common stock at March 31,June 30, 2010 reflectsreflect a 20 for 1 reverse split of the issued and outstanding common stock of the issuer.

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property and equipment, at cost, less accumulated depreciation:

15Property and equipment is summarized as follows:

Amortization for three months ended March 31,June 30, 2010 was $0 compared with three months ended March 31,June 30, 2009 $14,815,$40,195, respectively. Amortization for sixnine months ended March 31,June 30, 2010 was $195 compared with sixnine months ended March 31,June 30, 2009 $29,506,of $120,441, respectively. The difference between the 2010 and 2009 periods is due to the sale of certain office

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equipment owned by the Company on March 3, 2010.

NOTE 4 - CONVERTIBLE NOTES, WARRANTS AND STOCK OPTIONS

On March 22, 2007, we executed a subscription agreement with certain accredited investors, including Professional Offshore Opportunity Fund Ltd, pursuant to which we agreed to issue a principal amount worth $1,500,000 in senior convertible promissory notes and warrants to purchase shares of our common stock. The notes were issued with “Class A” warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $1.00 per share and “Class B” warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $1.50 per share.  Upon exercise of any Class A or Class B warrant, the respective warrantholderwarrant holder will receive a “Class C” warrant to purchase that number of shares for which such Class A warrant or Class B warrant is exercised at an exercise price of $2.00 per share. The Class A and Class B warrants expire five years from the issue date. The financing was closed on March 29, 2007.The2007 .The aggregate gross proceeds from the sale of the notes and warrants was $1,500,000.  The convertible notes were due and payable three years from the date of issuance. We prepaid all interest due under the convertible notes through the issuance of 1.5 million shares of our common stock.  The notes were initially convertible into our common shares at a conversion price of $1.00 per share.  After the occurrence of an event of default under the notes, the conversion price adjusts to eighty percent (80%) of the volume weighted average price of our common shares for the five trading days prior to a conversion date.

On February 6, 2009, we closed a Convertible Debt Settlement Agreement with these accredited investors (“Settlement Agreement”) pursuant to which we have re-purchased all of the outstanding senior convertible notes. We also amended the Warrants to remove any registration rights and purchase price reset provisions, among other changes. As additional consideration, limited mutual releases were given by the parties. In exchange for canceling the notes and underlying agreements, we agreed to pay back the principal amount of the Notes $(1,500,000),($1,500,000) and $610,126 in interest and default penalties. We paid $250,000 of the $1,500,000 in the principal amount at closing, and are obligated to pay $250,000 every 90 days from closing until the principal is paid in full. In addition to the payment made at closing, we also made a paymentprincipal payments of $250,000and $150,000 during fiscal 2009. During fiscal 2010, we made $100,000, $ 250,000, $165,000 and $250,000 on the obligation due in July, October and December 2009, respectively.$67,000 i n principal payments. We also agreed to pay interest and penalties of $6 10,126$610,126 within 90 days from the closing. Payment of the stated amount may be in the form of common shares of CEC Unet Plc. (AIM: CECU) which we held on the agreement date or if the shares of CECU were not trading on the AIM Market, then in cash or cash equivalents. We disposed our holdings of CECU shares in the CIGE transaction. As such, we are now required to pay the interest and penalty amount due in cash or cash equivalents. As the date of this report, as mentioned above, we made payments of $750,000$982,000 in principal to date, and we have not made any payments on the interest and default penalty amount. We are in default of our obligations to these investors. It is possible the investors could initiate litigation against us which cause us to incur additional costs and expenses. The balance of $1.36approximately $1.13 million which is due to these investors is included in other payables.

On March 9, 2009, we completed a Subscription Agreement with Redrock Capital Venture Ltd (“Redrock”), a BVI company, under which we issued up to $1,500,000 of our senior convertible notes (“Senior Notes”) to Redrock. On April 15, 2009, Redrock converted the $1,250,000 Senior Note into 83,333,333 shares of our common stock. We also issued Redrock 2,500,000 shares of our common stock as prepaid interest for the $1,250,000 Senior Note. On June 17, 2009, we received a notice of conversion from Redrock converting the $250,000 Senior Note into 16,666,667 shares of our common stock at a conversion price is $0.015 per share. On June 23, 2009, we issued 17,166,667 shares of our common stock to Redrock Capital Venture Limited. The amount represents 16,666,667 shares of our common stock issuable on conversion of the $250,000 Senior Note and 500,000 shares of our common stock issuable as prepaid interest

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on the Senior Note.

On March 26, 2010, we completed a Convertible Debt Settlement Agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”) to convert RMB 2,255,000 (approximately $329,866 USD) in outstanding loans due to Hua Hui into a convertible promissory note with a principal amount of $331,385$331,199 as of June 30, 2010 and will due in 18 months since issued date. The convertible promissory as effective as of March 3, 2010 and has the following features:

o

·

The Convertible Note is subordinate to an outstanding Convertible Debt Settlement Agreement and is senior to all

other current and future indebtedness of the Company.

o

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·

If the Company has not effectedaffected a “Qualified Funding” (as defined below) prior to August 31, 2011, then the entire Principal Amount will be due and payable on August 31, 2011 (the "Maturity Date").  

o·

If the Company has effected a Qualified Funding prior to August 31, 2011, then (i) an amount equal to the Qualified Funding will be due and payable within five (5) working days from the closing of the funding, and (ii) any unpaid Principal Amount will be due and payable on the Maturity Date.

o·

A Qualified Funding means any debt or equity funding received by the Borrower (after deducting all fees),

·

excluding however, any funding provided by Redrock Capital Group and Redrock Capital Ventures, Ltd., or any of their respective subsidiaries.

o·

Except for default interest, interest on the unpaid balance accrues at the rate of 6% payable on the Maturity Date,

o·

Hua Hui at its option may convert the Convertible Note to common stock of the Company at a conversion price of $0.11

o·

If there is a default in the payment after a Qualified Funding, then default interest will accrue on the amount of the Qualified Funding a rate of one percent (1%) per day until paid.

Warrants

At March 31,The interest of the three months and nine months ended June 30, 2010 the Company had no warrants outstanding.is $ 4,880 and $ 6,398, respectively.

NOTE 5 - OTHER PAYABLES AND ACCRUALS

Other payables and accruals are summarized as follows:

Other payables are amounts due to the investors who originally held our convertible notes and accrued expenses represents(See Note 4. -Convertible Notes, Warrants And Stock Options), professional fees, and other office expenses.

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NOTE 6 — COMMITMENTS AND CONTINGENCIES

Commitments

As of March 2010, the Company terminated its office lease.lease without penalty. Since the termination of its office lease, the Company maintains a representativean office through the office ofunder an oral arrangement with its shareholder Redrock Venture Capital Ltd.Sun Media Investment Holdings Limited. The arrangement is month to month, on a rent free basis. As a result the Company currently has no capital commitments in this regard.

The lease expense for the six months ended March 31, 2010 amounted to $10,811.

NOTE 7 -AMOUNTS DUE TO STOCKHOLDERS

The amounts due stockholders are summarized as follows:

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The amounts due to Redrock Capital Venture Limited are due on demand and bear no interest. Due to the termination of the Hua Hui transaction, the amounts due to Hua Hui have been reclassified as convertible notes on March 3, 2010 (See Note 4. -Convertible Notes, Warrants And Stock Options).

NOTE 8—8 -AMOUNTS DUE TO RELATED PARTIES

The amounts due related parties are summarized as follows:

The amounts $ 77,000 and $ 165,000 due to Redrock Thinktank (Group) Limited and Wu Bruno, respectively are due on demand after one-year and bear an annual interest of 5%. The amounts due to Redrock Thinktank (Group) Limited and Mr Wu Bruno Zheng were mainly used to pay the convertible notes investors in 2010 (see NOTE 4CONVERTIBLE NOTES, WARRANTS AND STOCK OPTIONS).

NOTE 9- HELD FOR SALE OPERATIONS

In connection with the CIGE and Ms. Wang Yihan transaction of March 31 2010, and which was subsequently amended on May 10, 2010, NextMart has agreed to transfer to CIGE the following assets: 1) 100% of the shares of William Brand Administer Ltd, a BVI registered company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and a wholly owned subsidiary of NextMart; 2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu Exhibition Ltd., a PRC registered company; 4) the net assets of NextMart’s 100% owned subsidiary Cancer Institute of ChinaSun New Media Group Ltd. (a BVI registered company) and its 100% owned subsidiary China Cancer Institute Ltd. (a PRC registered company). The net and 5) certain other miscellaneous non material assets. These assets being sold do not includeexcluded cash in all the subsidiaries cash,certain office furniture anda nd equipment and third party creditor’s rights and third party deb ts, which shall remain the subsidiary’s property; 5) anycertain other net assets and liabilities belonging to NextMart, with the exception of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining US$750,000 liability under the convertible bond settlement agreement.securities. (“Transferred Assets”)

These assets and liabilities had previously been sold to Beijing Hua Hui Investment Ltd. under a subscription and asset sale agreement signed on August 1, 2009 (see the Company’s Form 8-K filing dated August 4, 2009), and which arrangement was subsequently rescinded on March 3, 2010. All considerations were returned to the delivering party. NextMart accounted for the termination by adding the sum value of the assets originally sold to Hua Hui back on to the Company's balance sheet and canceling the shares issued to Hua Hui such that the company's share count will not include the shares issued to Hua Hui.

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Consequently, the following assets and liabilities, which reflect these businesses, have been segregated and included in assets and liabilities of held for sale operations, as appropriate, in the consolidated balance sheet as of March 31,June 30, 2010:

13

Moreover, the following income and expense items, attendant to these subsidiaries, have been segregated and included in income (loss) from held for sale operations, as appropriate, in the consolidated income statement for the three months and sixnine months ended March 31,June 30, 2010 and 2009.

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NOTE 9— COMMON STOCK

Pursuant to the transaction termination agreement with Hua Hui, 250,000,000 shares previously issued to Hua Hui were cancelled on March 22, 2010.

On March 3, 2010, we completed a Convertible Debt Settlement Agreement with Beijing Hua Hui to convert RMB 2,255,000 (approximately $329,866 USD) in outstanding loans due to Hua Hui into a convertible promissory note with a principal amount of $331,385. The convertible promissory note is convertible into common stock at the $0.11 per share (see Note 4 - Convertible Notes, Warrants And Stock Options).

NOTE 10—10- GOING CONCERN AND MANAGEMENT PLAN

The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of March 31,June 30, 2010, the Company had an accumulated deficit totaling $96,523,272$96,576,316 and its current assetsliabilities exceeded its current liabilitiesassets by $(563,799).$608,213. In view of the matters described above, the appropriateness of the going concern basis is dependent upon continuing operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In September 2008, dueAs a result of the Company’s recent transactions with CIGE and Wang Yihan, as amended, its future business strategy is art event and art media direct marketing, direct sales of art products and art-themed luxury goods, and providing marketing and sales for art related real estate development projects. The Company plans to market conditions,leverage the art event and art media advertising and marketing channels acquired in the Acquisition Agreement to offer unique art related marketing and advertising services targeting China’s wealthiest consumers.  

The Company also entered into a strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company determined to divest itself of the William Brand Administer Ltd’s women apparel business and other non-material businesses. In keeping that intent, in August 2009, as disclosed elsewhere herein, it effected an agreement with Beijing Hua Hui Hengye Investment Lt. which was subsequently rescinded by the parties terminated on March 3, 2010.

On March 31, 2010, NextMart entered into an asset exchange and subscription agreement (the “Agreement”) with Ms. Wang Yihan and

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Beijing Chinese Art Exposition's Media Co.,major shareholder Redrock Capital Venture Ltd. (“CIGE”Redrock”), a leading Chinese art services, events, and media company located in Beijing, China. CIGE’s main business operations includes operating and managing the China International Gallery Exposition, the largest exhibition of art galleries in China, and operating and managing China’s “Gallery Guide” magazine, a monthly magazine featuring news and events targeting top Chinese art collectors and galleries with a monthly distribution rate of over 10,000 copies. Miss Wang Yihan is the owner of 100% of CIGE. Under the Agreement, CIGE agreed to inject into NextMart certain assets and in exchange, NextMart. Redrock Land has agreed to issue to CIGE warrants representing 50,000,000 shares of the Company’s common stock as well as assign certain Company assets described below. The assets which CIGEprovide NextMart a $1,000,000 interest free loan due on demand after one year. SMIH has agreed to inject intoprovide NextMart were as follows: 1) the CIGE member database, which is a database developedwith approximately $6,000,000 worth of advertising space over the last six year s that contains the names and data for over 10,000 individuals and companies; 2) exclusive ownership of the sales rights for the advertising space at every CIGE exhibition locatednext five years in greater China (including Hong Kong and Macao, but excluding Taiwan) for the next 30 years, as well as control the commercial and editorial rights (meaning the right to control the content and advertising space but not ownership of the magazinevarious media outlets owned by it or its day to day control), of its Gallery Guide magazine for the next 30 years; and 3) within 24 months CIGE agreed to transfer to NextMart at its discretion either; land usage rights acceptable to NextMart for property capable of being developed or used for the purpose holding art exhibitions with a valuation of $3,650,000, or common stock of a publicly traded company acceptable to NextMart which shall have a value of no less than US$3,650,000. In addition, the Company received the right of first refusal to participate in any future sale of CIGE’s common stock by CIGE or its control ling shareholder, Ms. Wang Yihan, to any third party. Ms. Wang Yihan also is the President of the Company.

As consideration for the CIGE assets listed above and the Right of First Refusal, NextMart agreed to issue to CIGE stock purchase warrants for 50,000,000 shares of the Company’s common stock (the “Warrants”). The Warrants shall have an exercise price of US$0.016 and must be exercised within 24 months of being issued. Under the terms of the issuance, NextMart shall issue the warrants to CIGE within 10 days of signing the Agreement.affiliates.

In addition to issuingits arrangement with Redrock Land, the Warrants as consideration for the assets listed above, NextMart has agreed to transfer to CIGE the following assets: 1) 100% of the shares of William Brand Administer Ltd, a BVI registered company and a wholly owned subsidiary of NextMart; 100% of the shares of Credit Network 114 Limited, a BVI registered company and a wholly owned subsidiary of NextMart;  2) 100% of NextMart’s 60% shareholdings in Wuxi Sun Network Technology Ltd., a PRC registered company; 3) 100% of NextMart’s 80% shareholdings in Naixiu Exhibition Ltd., a PRC registered company; 4) the net assets of NextMart’s 100% owned subsidiary Cancer Institute of China Ltd. (a BVI registered company) and its 100% owned subsidiary China Cancer Institute Ltd. (a PRC registered company). The net assets being sold do not include the subsidiaries cash, office furniture and equipment, and third party creditor’s rights and third party debts, which shall remain the subsidiary’s pr operty; 5) any other net assets and liabilities belonging to NextMart, with the exception of its 3,000 shares of China Grand Resorts Inc. common stock and its remaining US$750,000 liability under the convertible bond settlement agreement (the “Transferred Assets”).

The agreement between the parties was subsequently amended on May 10, 2010, with the amendment made effective as of March 31, 2010. Under the terms of the amended agreement, NextMart agreed to sell directly to Ms. Wang the Transferred Assets. The parties placed a valuation of $5,391,255 on the above described assets which amount is based on a third party valuation report of the assets prepared as of March 31, 2010.  

As consideration for the sale of the Transferred Assets, Ms. Wang agreed to transfer to NextMart within 24 months from date of the amended agreement certain land usage rights for commercial real estate property valued at no less than $5,390,000. The value of the land use rights will be determined by an appraisal conducted by a licensed third party appraiser acceptable to both parties. In the PRC, there is no private land ownership in the PRC. Rather, land in the PRC is owned by the government and cannot be sold to any individual or entity. The government grants or allocates landholders a “land use right,” which is sometimes referred to informally as land ownership.

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Land use rights are granted for specific purposes and for limited periods. Each period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations. In the event Ms. Wang fails to provide land usage rights for adequate real estate property within the 24 month period, she is obligated to provide NextMart with tangible assets acceptable to NextMart which shall have a value of no less than $5,390,000.

Additionally, under the terms of the amended agreement, (i) CIGE will not transfer to NXMR ownership of its member database and the advertising sales rights for its CIGE art exposition events orGallery Guide magazine, (ii), NextMart will not issue to CIGE the stock purchase warrants for 50,000,000 shares of its common stock, and (iii) the right of first refusal originally granted to NextMart has been rescinded. Separately, CIGE and SMIH and Redrock have agreed that SIMH and Redrock will not be transferring 8,775,086 and 65,386,214 shares of the Company’s common stock held by such parties, respectively, to CIGE as reported in the original Form 8-K.

As a result of these transactions, NextMart’s current business operations consists of developing, marketing, and selling high end art products and co-branded art-themed luxury products. The Company has undertake its art themed product sales business under a newly created “Artslux” brand and is developing partnerships with well known artists and luxury goods producers to create the art products and co-branded art themed luxury goods it plans to sell.

The Company is actively pursuing additional funding includingand arrangements with third parties and potential strategic partners in an effort to fund its ongoing working capital requirements. The Company’s expects that its working capital requirements for the next 12 month will beis estimated at approximately $2,100,000.$1.5 million. Management is hopeful that the above actions will allow the Company to continue its operations through the current fiscal year.

NOTE 11— SUBSEQUENT EVENTS

As described above, on May 10, 2010, the Company amended the asset exchange and subscription agreement entered into by NextMart, CIGE, and Ms. Wang Yihan on March 31, 2010. The amended agreement is effective as of March 31, 2010. On May 14, 2010, the Company filed a Form 8-K to disclose the amended agreement.

At the time of signing the amended agreement on May 15, 2010, Miss Wang Yihan was the CEO and President of NextMart as well as a party the amended agreement and the sole shareholder of CIGE. We believe that the amended agreement is the result of arms' length negotiation between the parties and the terms of the amended agreement are fair and reasonable.

NOTE 11- SUBSEQUENT EVENT

On July 8, 2010, the Company issued to Ms. Wang Yihan 75,000,000 shares of its common stock in fulfillment of its obligation under the Acquisition Agreement.

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly reportQuarterly Report on Form 10Q10-Q contains forward-looking statements. These"forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the " Securities Act ") and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the " Exchange Act "). Such statements relate to, future events oramong other things, our future plans of operations, business strategy, operating results and financial performance. In some cases, you can identify forward-looking statementsposition and are often, though not always, indicated by terminologywords or phrases such as “may”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”"anticipate," "estimate," "plan," "project," "outlook," "continuing," "ongoing," "expect," "believe," "intend," and similar words or “continue” or the negative of these terms or other comparable terminology.phrases. These forward-looking statements include statements other than historical information or statements of current condition, but instead represent only our belief regarding future events, many of which by their nature are inherently uncertain and outside of our control. Important factors that could cause actual results to differ materially from forward-looking statements include, but are not limited to, those described in the section titled “Risk Factors” previo usly"Risk Factors" previously disclosed in our Annual Report on Form 10-K for the periodyear ended September 30, 2009. Although2008:

Our short operating history and rapidly evolving business makes it difficult for us to accurately forecast revenues and expenses;

Our business model is largely untested;

 Our need for additional capital (and concomitant dilution effect);

Certain risks also exist with respect to our newly developed and developing art themed product and services and  marketing business. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we believe thatassess the expectations reflectedimpact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in theany forward-looking statements. We undertake no obligation to update or revise any forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performancein this Report to reflect any new events or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any change in conditions or circumstances. All of the forward-looking statements to conformin this Report are expressly qualified by these statements to actual results.

cautionary statements.

Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. In this annual report, unless otherwise specified, all dollar amounts are expressed in United States Dollars.

As used in this annualquarter report, the terms “we”, “us”, “our”, and “NXMR” mean NextMart, Inc. and its wholly-owned subsidiariessubsidiaries.

Overview

Prior to fiscal year 2008, we had planned to develop an integrated online-offline direct sales platform for the ladies' apparel sector in China involving William Brand Administer Co. Ltd. However, our business and business strategy were adversely impacted in a material manner due to the appreciation of the Chinese currency (yuan)(Yuan) against the US dollar (which resulted in US consumers paying higher prices for products manufactured in China), coupled with an already weak US retail market. Accordingly, we were unable to meet our projected operating results and milestones for the various periods. The lack of operating results adversely impacted our stock price during the applicable periods. Due to the depressed price of our common stock together with the overall world-wide financial market turmoil, we were unable to raise the necessary funds to support our expansion strategy. Consequently in May 2008, we determined to change our business focus initially attemptingat tempting to focu sfocus on the financial advisory/direct investments, and thereafter, redirecting this focus towards the healthcare industry in China.

After our transaction with Hua Hui in August 2009, our business strategy was to develop a network of upscale, private member health clubs in the PRC, however as noted above, on March 3, 2009 the Company and Hua Hui rescinded the transaction.

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As a result of our recent transaction with CIGE and Wang Yihan, as amended, ourits future business strategy is develop, market,art event and sellart media direct marketing, direct sales of art products and art-themed luxury goods. goods, and marketing and sales for art related real estate development projects. (Please refer to a detailed description of our proposed business contained in our Form 8-K filing dated June 23, 2010, as amended on July 1, 2010). It intends to capitalize on its CIGE relationship as well as the experience, brand recognition, and resource integration capacities of its major shareholders, including Ms. Wang Yihan, Redrock Capital Venture, Ltd., and Sun Media Investment Holdings Limited. We began developing our business in March 2010 when Ms. Wang became the Company’s Chairman and CEO and soon thereafter, the Company launched its “Artslux” branded products.

Going forward, our business operations will include:

o

art event and art media direct marketing;

o

design and marketing of art-themed products lines created for existing luxury and high-end goods and brands and art themed real estate developments,

Art Event And Art Media Direct Marketing

NextMart plans to leverage the art event and art media advertising and marketing channels acquired from CIGE to offer unique art related marketing and advertising services targeting China’s wealthy consumers. Prospective clients will include any luxury brand goods and/or services companies targeting China’s sophisticated and wealthy classes. In addition, we expect to provide marketing channels for its Artslux branded products. Client advertisers will be provided with a detailed description of services and a budget for its specialized advertising or marketing program. The program may include brand consulting, direct mail pieces and advertising space in our art events and/or our media advertising channels which will be tailored to meet the specific needs of each client. For our services, we will charge a negotiated fee dependent on the parameters of the marketing effort. We intend to use the following art related advert ising and marketing channels:

-The 10,000 member CIGE Consumer Database,

-All advertising rights forChina International Gallery Exposition,

-All advertising rights forGREEN Exhibition,

-All advertising rights toGallery Guide Magazine, and

-$1,200,000 in advertising space in various print magazines and online websites and e-magazines owned by SMIH or its affiliates for five consecutive years.

We expect that the total costs for the company’s direct advertising and marketing will be approximately $250,000 for the first year of operations. Of the $250,000 amount, $190,000 is allocated to selling expenses including marketing and logistics for services, and $60,000 is allocated to general and administrative expenses including rent, salaries, office expenses, and miscellaneous expenses.

Art Themed Products and Services Design and Development

The Company is currently setting up a PRC operating company in orderwill use Oxas Beijing Limited to operate its art-themed product salesand services division. Under the brand name of “Artslux”, the Company plans to leverage its shareholder resources to form partnerships with the world’s most recognized artists and Chinese and international high-end luxury goods providers, financial institutions, and real estate developers to create and/or selland design value added art themed products and co-branded art-themed luxury products.services for existing product lines. Art products and services that the Company is considering selling include items such as lithographsplanning to create and professional replicas of variousdesign include:

1. Art Branded High-End and Luxury Goods

The company has already begun to develop art pieces producedthemed wines and spirits by partnered artists. The Company is currently working to begin producing and selling art-themed products which would includecreating limited edition artist labels that would be printed for select high-end wines and liquors producedspirits. We also plan to create watches, cigar boxes, jewelry, furniture, electronics, etc. designed by internationally acclaimed producers with customized labels featuring the works of renowned Chinese and inter nationalfamous artists or other luxury goods like watches, jewelry, etc. produced by the

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leading brands but featuring designs bytheir artworks. We have already partnered artists. We expect that the Artslux operation will consistwith Chinese artist Cheng Yifei and Chateau Pey La Tour to produce and launch a limited edition artist collection of a team initially of 5 employees, including a head of operations, sales manager, marketing manager, product developer, and product designer. This teamChateau Pey La Tour. It is already in place and is currently being supported by an affiliate of our major shareholders SMIH and Redrock. Upon the completing the registration of the PRC operational company by NextMart, the Artslux team will operate under the new company. We expectestimated that the total costs for the company’s product sales division will be approximately US$2,100,000$270,000 for the first yearnext 12 months of operations. Of the $2,100,000$270,000 amount, $1,242,000$80,000 is allocated to cost of sales which includes product purchasing and artist licensing and design fees, $640,000$190,000 is allocated to selling and

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general expenses including marketing and logistics, support staff, among other items.

2. Financial Institution Products and $248,000Services

We plan to begin developing art themed products and services for major financial institution. The products and services could include credit cards for high-net individual customers, art themed luxury goods as special gifts for high value clients, art themed luxury goods for loyalty rewards programs and for sale in product catalogues. While the company expects to begin producing such products and services sometime in the next 12 months, the company at this time has not yet engaged in serious negotiations with any parties, and we are therefore still unsure of the costs that will be associated with such products and services.

3. Art Branded Real Estate

NextMart is offering unique art based real estate consulting, marketing, and sales services to real estate developers in China under its brand “Artslux”. We plan to leverage our art industry know-how, reputation in the art community, and extensive art related marketing and sales channels to assist developers to successfully develop art-themed real estate developments. Under our model, NextMart will act as strategic advisor to real estate developers to create unique development concepts centered on art facilities and artistic communities. Art themed real estate development projects would include artist living/work spaces, galleries, exhibition spaces, multi-function art galleries, museums, auction houses and other facilities. The Company is currently in final status negotiations with certain real estate developers and local governments to produce and art development just outside Beijing. We target to close the deal sometime in the fourth quarte r of fiscal 2010. The Company estimates that the total costs for its art themed real estate development business will be approximately $300,000 for the next 12 months of operations. Of the $300,000 amount, $90,000 will be allocated to cost of sales which includes government lobbying, and professional services fees for feasibility reports and concept designers, and $210,000 is allocated to generalG&A such as selling costs, rent, and administrative expenses including rent, salaries, among other costs.

For the next 12 months of 5 employees mentioned above, office expenses, an d miscellaneous expenses. The Company is hopeful to initially fund a majority ofits “Artslux Branded” art themed products and services design and development business, NextMart expects that the required expenses from shareholder loans,total costs associated with the remainderbusiness will be approximately $570,000. Of the $570,000 amount, $170,000 will be allocated to cost of the required capital for the business expectedsales, which includes design and development costs, third party outsourcing costs, etc, while $400,000 will be attributed to come from a combination of revenues from operations and from a planned round of fundraising from third parties. We expect to generate sales in the first quarter of fiscal 2010. Please refer to our Form 8-K filed on May 14, 2010, for a description of the amended agreement with the CIGE and Ms. Wang Yihan. Ms. Wang is the Company’s President and CEO.G&A.

Results of Operations       

The following discussion relates to our existing internet and marketing consulting businesses. We provide internet based marketing and web-site development services to other companies in China. The discussions below exclude the results of operations of our businesses held for sale discussed elsewhere herein, except for the (Loss) Income from held for sale operations discussion below.

Three Months Ended March 31,June 30, 2010 compared with Three Months Ended March 31,June 30, 2009 (Unaudited)

Sales and Cost of Sales.  We do not have anyOur sales for the three months ended March 31, 2010 and 2009.

Sales and CostJune 30, 2009 was $57,215. These sales from the 2009 period were primarily due to the operation of Sales.  Duringconsulting service business. We did not have any similar revenues for the three months ended March 31, 2010 and 2009, our costs of sales were both $0.comparable period in 2010.

Gross MarginMargin.. As a result Our cost of the foregoing, our gross marginsales for the three months ended March 31, 2010 andJune 30, 2009 was $18,593. This was primarily due to the operation of consulting service business. The costs of sales for the 2009 period were both $0due to the operation of consulting service business.

Operating ExpensesExpenses.. Operating expenses which include general and administrative expenses, consulting and professional fees, and depreciation and amortization, for the three months ended March 31,June 30, 2010 totaled $77,430,$48,215, a decrease of $189,791$ 184,584 or 71%79% from $267,221$232,799 for the corresponding 2009 period. General and administrative expenses were $31,588$20,955 for the 2010 period, a decrease of $91,894 or74%$153,254 or 88% from $123,482$174,209 for the 2009 comparable period. The decrease is due to reduced head count and related salaries and related expenses at our corporate office. Depreciation and amortization totaled $0 and $40,195 for the 2010 period a decrease of $94,815 from $94,815 for the comparableand 2009 period.period, respectively. The decrease is due to reduction in amortization resulting from the property and equipment sold in the asset exchange and subscription agreementdisposition of March 31, 2010 and amended on May 10, 2010.intangible assets. Consulting and professional fees for the 2010 period totaled $45,842, a decrease$27,260, an increase of $3,082$8,865 or 6%48% from $48,924$18,395 for the comparable period in 2009. The decrease for the curren t period is due to a decrease in the use of such professional services during the 2010 period.increase reflects higher legal fees i n connection with launching our new art based business.

Operating Loss.Loss As we have no sales and cost of sales, the. We had an operating loss isof $48,215 for the same as operation expenses.2010 period compared with an operating loss of $194,177 for

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the comparable period in 2009. The decrease of $189,791$145,962 or 71%75% from the prior period is because of the factors discussed above.

Other Income (Expense)(Expense). We had an Interest expense of $4,880 for the 2010 period compared with an interest expense of $290,000 for the comparable period in 2009. For the 2009 period, we had penalty of cancelling convertible notes of $ 610,168 and we did not have these items in 2010.

Loss from continuing operations. Our loss from continuing operations for the three months ended June 30, 2010 and 2009 was $53,044 and $1,094,345, respectively. The reason of the differences is due to the reasons discussed above.

Loss from held for sale operations. Our loss from held for sale operations for the three months ended June 30, 2009 was $64,189.

Net loss. We had an impairmenta net loss of $53,044 for the 2010 period compared with a net loss of $1,158,534 for the comparable period in 2009.

Other Comprehensive Income (Loss). We had a foreign currency translation adjustment loss of $1,971 for the 2010 period compared with a loss of $149,101 for the comparable period in 2009. The difference is due to the value of the US dollar in comparison to the RMB and HK dollar. In 2010, we had an unrealized gain of $420 compared with a loss of $9,568 for the comparable period in 2009.

Total comprehensive loss. For the three months ended June 30, 2010, we had a comprehensive loss of $54,595 compared with a comprehensive loss of $1,298,067 for the comparable period in 2009 for the reasons discussed above.

Nine Months Ended June 30, 2010 compared with Nine Months Ended June 30, 2009

Sales. Our sales for the nine months ended June 30, 2009 was $98,852. These sales were primarily due to the operation of consulting service business. We did not have any similar revenues for the comparable period in 2010.

Cost of sales. Our cost of sales for the nine months ended June 30, 2009 was $20,675. This was primarily due to the operation of consulting service business. The decrease is in line with the drop in sales.

Gross Margin. As a result of the foregoing, our gross margin for the nine months ended June 30, 2001 and 2009 was $0 and $78,177 respectively.

Operating Expenses. Operating expenses which included general and administrative expenses, consulting and professional fees, and depreciation and amortization, for the nine months ended June 30, 2010 totaled $203,690, a decrease of $ 415,747 or 76% from $619,437 for the corresponding 2009 period. General and administrative expenses were $92,113 for the 2010 period, a decrease of $ 294,001 or 76% from $386,114 for the 2009 comparable period. The decrease is due to reduced headcount and related salaries and expenses at our corporate office due to our scaled down operations.. Depreciation and amortization totaled $195 and $120,441 for the 2010 period and 2009 period. The decrease is due to reduction in amortization resulting from the disposition of intangible assets. Consulting and professional fees for the 2010 period totaled $111,382, a decrease of $1,500 or 1% from $112,882 for the comparable period in 2009. The decrease reflects lo wer consulting fees in the first and second quarters of the year due to the scaled down operations during such periods.  

Operating Loss. We had an operating loss of $203,690 for the 2010 period compared with an operating loss of $541,260 for the comparable period in 2008. The decrease from prior period is due to the factors discussed above.

Other Income (Expense). We had gain on disposal of fixed assets of $165 and exchange gain of $51 during the 2010 period. We did not have similar items for the comparable period in 2009. We had an interest expense of $12,942 for the 2010 period compared with an interest expense of $420,000 for the comparable period in 2009. For the 2009 period, we had penalty of cancelling convertible notes of $ 610,313, and change in fair value of CN & warrants option of $562,895 and we did not have these items in nine months ended by June 30, 2010.

Loss from continuing operations. Our loss from continuing operations for the nine months ended June 30, 2010 and 2009 was $5,886,922 and $2,134,468, respectively. The difference is due to the reasons discussed above.

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Loss from held for sale of $5,670,506, interest expense on a senior convertible noteoperations. We had impairment loss of assets held for sale of $5,670,506 interest expense – senior convertible note of $1,518 and  gain on disposal of fixed assets of $165 during the 2010 period and we did not have these items in 2009. We had an amortization of discount on convertible note of $35,741 and interest expense –warrants option of $65,000 in 2009 and we did not have these items in 2010.We had an interest expenses of $2,229 and $24 in 2010 and 2009 respectively.

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(Loss) Incomea loss from the operations held for sale.  We had a loss from the sale of operations of $352,368 for the threenine months ended March 31,June 30, 2010 and in 2009 we had incomecompared with loss of $580,978 from held for sale was $48,156.operations for the nine months ended June 30, 2009.

Net loss. We had a net loss of $6,239,290 for the 2010 period compared with a net loss of $2,715,446 for the comparable period in 2009.

Other Comprehensive Income (Loss). Our foreign currency translation adjustment for the threenine months ended March 31,June 30, 2010 and 2009 were $7,431 and $(83,921) respectively.$8,558 and$(147,222). The difference is due to the value of the US dollar in comparison to the RMB and HK dollar. Our unrealized loss for the threenine months ended March 31,June 30, 2010 and 2009 were $0$11,100 and $40,664 respectively.$447,306 respectfully.

Total comprehensive loss. For the threenine months ended March 31,June 30, 2010, we had a comprehensive loss of $6,096,455$6,241,793 compared with a comprehensive loss of $444,367 for the comparable period in 2009 for the reasons discussed above.

Six Months Ended March 31, 2010 compared with Six Months Ended March 31, 2009 (Unaudited)

Sales. Our sales for the six months ended March 31, 2010 and 2009 were $0 and $41,637 respectively. These sales were primarily due to the operation of consulting service business occurring in the first fiscal quarter of 2009 period.

Cost of sales. Our cost of sales for the six months ended March 31, 2010 and 2009 were $0 and $2,082 respectively. This was primarily due to the operation of consulting service business.

Gross Margin. As a result of the foregoing, our gross margin for the six months ended March 31, 2010 and 2009 were $0 and $39,555 respectively.

Operating Expenses. Our operating expenses for the six months ended March 31, 2010 and 2009 were $155,475 and $415,892 respectively. General and administrative expenses for the 2010 and 2009 periods were $71,158 and $211,899, respectively. The decrease in the 2010 period was due to the assets exchange and reduced salaries and related expenses at our corporate office. The depreciation and amortization expenses were $195 and $109,506 respectively. The decrease in the 2010 period is mainly due to the property and equipment is dealt in the asset exchange and subscription agreement. Consulting and professional fees were $84,122 and $94,487, for the 2010 and 2009 periods, respectively.

Operating Loss. We had an operating loss of $155,475 for the 2010 period compared with an operating loss of $ 376,337 for the comparable period in 2009. The decrease from prior period is due to the factors discussed above.

Other Income (Expense). We had impairment loss of assets held for sale of $5,670,506, interest expense – senior convertible note of $1,518, gain on disposal of fixed assets of $165 during the 2010 period and we did not have these items in 2009. We had an interest expense of $6,544 for the 2010 period compared with an interest expense of $153 for the comparable period in 2009. For the 2009 period, we had an amortization of discount on convertible note of $71,482 and interest expense –warrants option of $130,000 and we did not have these items in 2010.

(Loss) Income from operations held for sale. We had a loss from operations held for sale of $352,368 and $978,942 for the six months ended March 31, 2010 and 2009, respectively.

Other Comprehensive Income (Loss). Our foreign currency translation adjustment for the six months ended March 31, 2010 and 2009 were $6,625 and $(165,029) respectively. The difference is due to the value of the US dollar in comparison to the RMB and HK dollar. Our unrealized loss for the six months ended March 31, 2010 and 2009 were $11,520 and $456,873 respectively. For the six months

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ended March 31, 2010, we had a comprehensive loss of $6,191,141 compared with a comprehensive loss of $2,178,816$3,309,974 for the comparable period in 2009 for the reasons discussed above.

Liquidity and Capital Resources.Resources

We have financed our operations primarily through cash generated from equity investments, operating activities and a mixture of short and long-term loans from affiliates (some of which have been converted to equity)for affiliated and non-affiliates.non-affiliated parties.

The following table summarizes our cash flows for the sixnine months ended March 31,June 30, 2010 and 2009:

The net cash used in operating activities forthe nine months ended June 30, 2010 was $(248,691), compared with net cash used in operating activities of $(176,888) for the nine months ended June 30, 2009. The difference is due to the assets stripping occurred during the nine months ended June 30, 2010.

The net cash used in investing activities for the nine month ended June 30, 2010 was $49,072, compared with net cash provided by investing activities of $(68,322) for the nine month ended June 30, 2009. The decrease of $19,250 is primarily caused by the loans from the related parties in the 2010 period.

The net cash provided by financing activities for the nine month ended June 30, 2010 was $170,339, compared with net cash provided by financing activities of $382,309 for the nine month ended June 30, 2009. The difference of $211,970 is mainly due to the high payments to original convertible notes holders.The effect of the exchange rate on cash was a loss of $3,386 for the nine months ended June 30, 2010, compared with a loss of $144,034 for the nine months ended June 30, 2009. The difference is due to reduction in foreign currency transactions.

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The difference between the closing balance of cash and cash equivalents for the nine months ended June 30, 2010 and 2009 is due to the reasons mentioned above.

As of March 31,June 30, 2010, we had total assets of $3,814,412,$3,809,593, total liabilities of $4,037,173$4,083,006 and a working capital deficit of $(563,799).$(608,213)

On March 26, 2010, with an effective however ondate of March 3, 2010, we completed a Convertible Debt Settlement Agreement with Beijing Hua Hui Hengye Investment Lt. (“Hua Hui”) to convert RMB 2,255,000 (approximately $329,866 USD) in outstanding loans due to Hua Hui into a convertible promissory note with a principal amount of $331,385.$331,199 as of June 30, 2010. The issued notes were due on demand and accrue interest accrued at the rate of 6% per annum until paid.

We expect that the total costs for the company’s direct advertising and marketing will be approximately $1,000,000 for the next 12 months of operations. Of the $1,000,000 amount, it is estimated that $400,000 will be allocated to cost of sales and $600,000 will be allocated to G&A for expenses including marketing and logistics for services, rent, salaries, office expenses, and miscellaneous expenses. The Company expects that a substantial portion of the required costs will funded by the Redrock Land loan. We expect that revenues from our marketing efforts will commence in the fourth fiscal quarter of 2010, and that such revenues, along with the Redrock Land loan, will enable the Company to fund this aspect of its operations for the next 12 months.

We expect that the total costs for the company’s product salesand services design and development division will be approximately $2,100,000 for$570,000 over the first yearnext 12 months of operations. Of the $2,100,000$570,000 amount, $1,242,000it is estimated that $170,000 will be allocated to cost of sales, which includes product purchasingmainly design and artist licensing fees, $640,000 is allocateddevelopment costs and third party outsourcing costs, etc, while $400,000 will be attributed to selling expenses includingG&A for marketing, and logistics, and $248,000 is allocated to general and administrative expenses includingstaff, rent, salaries of 5 employees mentioned above, office expenses, and miscellaneous expenses.among other items. The Company is hopefulplans to initially fund approximately $500,000a portion of the required expenses from loans from shareholders or their affiliates,through the Redrock Land loan, with the

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remainder of the required capital for the business expected to come from a combination of revenues from operations and from a planned round of fundraising from third parties. We expect to undertake a fundraising effort in the first calendar quarter of 2011. At the current time, we have no commitments from any third party in respect of the proposed fundraising effort. We expect to generate sales fromin the sale of our art themed products during the thirdfourth quarter of fiscal 2010. Thereafter,

We expect that the total costs for the ArtChina art related marketing and product design business will be approximately $1,570,000 for the next 12 months of operations. Of the $1,570,000 amount, $570,000 will be allocated to cost of sales which includes government lobbying, and professional services fees for feasibility reports and concept designer, $300,000 will be allocated to selling expenses including marketing and sales, and $700,000 will be allocated for general and administrative expenses including rent, and salaries, among other costs. The Company believes that revenuesexpects the required capital for this business to come from its operations will support its ongoing operational needs. Presently,a planned round of fundraising from third parties which we expect to undertake in the fourth quarter of 2010 or first calendar quarter of 2011. At the current time, we have no arrangement or understanding withcommitments from any third party including any shareholder or their affiliates, regardingin respect of the raisingproposed fundraising effort. Prior to such fundraising, the Company may develop the initial aspects of required capital. We cannot provide assurances that we will be successful in our efforts to enhance our liquidity. If we are unable to raise sufficienti ts business using funds to meet our cash requirements as described above, we may be required to curtail, suspend, or discontinue our current and/or proposed operations. Our inability to raise additional funds as described above may forced us to restructure, file for bankruptcy, sell assets or cease operations, any of which co uld adversely impact ourfrom the Redrock Land loan, and from revenues generated from other business and business strategy, and the value of our capital stock. Due to the current price of our common stock, any common stock based financing, including transactions with affiliates which may entail the equity conversion of existing loans, will create significant dilution to the then existing stockholders. In addition, in order to conserve capital and to provide incentives for our employees and service providers, it is conceivableextent that we may issue stock for services in the future, which also may create significant dilution to existing stockholders.such revenues are available.

NextMart reminds investors that its plans to re-structuredevelop its business and adopt a new business in art related industryas described herein will be subject to various conditionsnumerous risks and requirements. These conditions and requirements include but are not limiteduncertainties, including its ability to raise the necessary capital to implement its business plan. Presently, the Company has no arrangement with any third party, other than as disclosed herein, to provide any capital to the abilityCompany. Its new business also will be subject to obtain capital in the near term, formal agreements with numerous parties, including artists, luxury goods manufacturers, and real estate developers, certain asset valuations, fairness opinions, and various approvals including, potentially otherbut not limited to regulatory approvals, none of which can be affirmed as of the date of this report.approval. The Company also reminds investors that even if it is able to meet the various conditionsrequirements and requirementsregulations indicated above, it can notcannot predict whether it will be successful with its new business initiatives.

Contractual Obligations

 None.On June 22, 2010, NextMart Inc. (“NextMart” or the “Company”) entered into an asset acquisition agreement (the “Acquisition Agreement”) with Beijing Chinese Art Exposition Media Co. Ltd (“CIGE), a Chinese art exhibition and media company, and Ms. Wang Yihan, the sole owner and director of CIGE who is also our Chairman and CEO. Under the terms of the Acquisition Agreement, NextMart acquired from CIGE the below described Assets for an agreed price of $750,000 (the “Consideration”). NextMart is obligated to pay the Consideration by issuing to Ms. Wang Yihan 75,000,000 shares of its common stock. As a result of this transaction, Ms. Wang will become NextMart’s second largest

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shareholder with a 27.96% ownership of the company. The effective date of the transaction is July 1, 2010.

New Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued amended revenue recognition guidance for arrangements with multiple deliverables (ASU No. 2009-13) (ASC No. 605). The new guidance eliminates the residual method of revenue recognition and allows the use of management’s best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third-party evidence (TPE) is unavailable. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The Company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements.

In October 2009, the FASB issued guidance which amends the scope of existing software revenue recognition accounting (ASU No. 2009-14) (ASC No. 985). Tangible products containing software components and non-software components that function together to deliver the product’s essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the Company, this guidance is effective for all new or materially modified arrangements entered into on or after January 1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the Company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The Company is currently assessing its implementation of this new guidance, but does not ex pectexpect a material impact on the Consolidated Financial Statements.

In September 2009, the FASB issued amended guidance concerning fair value measurements of investments in certain entities that

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calculate net asset value per share (or its equivalent) (ASU No. 2009-12) (ASC No. 820). If fair value is not readily determinable, the amended guidance permits, as a practical expedient, a reporting entity to measure the fair value of an investment using the net asset value per share (or its equivalent) provided by the investee without further adjustment. The amendments are effective for interim and annual periods ending after December 15, 2009. The Company does not expect a material impact on the Consolidated Financial Statements due to the adoption of this amended guidance.

In August 2009, the FASB issued guidance on the measurement of liabilities at fair value (ASU No. 2009-5) (ASC No. 820). The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles. The Company adopted this guidance in the year ended November 30, 2009 and there was no material impact on the Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2009-02. “Amendments to Various Topics for Technical corrections.” ASU No. 2009-2 is an omnibus update that is effective for financial statements issued for interim and annual periods ending after July 1, 2009. This Statement did not impact the Company’s Consolidated Financial Statements.

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168 (ASC No. 105), “The FASB Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (the Codification). The Codification, which was launched on July 1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No. 162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this Statement for its year ended November 30 , 2009. There was no change to the Company’s Consolidated Financial Statements due to the implementation of this Statement.

In June 2009, the FASB issued SFAS No. 167 (ASC No. 810), “Amendments to FASB Interpretation No. 46(R),” and SFAS No. 166 (ASC No. 860), “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (ASC No. 860).” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 166 amends SFAS No. 140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The Company will adopt these Statements for interim and annual reporting periods beginning on January 1, 2010. The Company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued SFAS No. 165 (ASC No. 855), “Subsequent Events.” This Statement sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or

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transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after June 15, 2009. The Company adopted this Statement in the year ended November 30, 2009. This Statement did not impact the consolidated financial results.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as stockholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Application of Critical Accounting Policies

Our significant accounting policies are described in Note 1 to our audited consolidated financial statements previously included in our Annual Report on Form 10-K for the year ended September 30, 2009. We prepare our financial statements in conformity with U.S. GAAP, which requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period.

Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demand on our management’s judgment.

Revenue Recognition

We generate revenue through consulting services and recognize such revenues from consulting services in accordance with Staff Accounting Bulletin (“SAB”) No. 104 (ASC No. 605), “Revenue Recognition,” when all of the following conditions exist: persuasive evidence of an arrangement exists in the form of providing consulting services; or services have been rendered; the Company’s consulting fee received from the clients is fixed or determinable pursuant to the terms of the consulting agreement and these amounts appear to be collectible.

Income Taxes

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We account for income taxes under the provisions of SFAS No. 109 (ASC No. 740), "Accounting for Income Taxes," as described in Note 8 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the period ended September 30, 2009. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our

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deferred tax assets would be charged to our income in the period such determination is made. We record income tax expense on our taxable income usingusi ng the balance sheet liability method at the effective rate applicable in China in our consolidated statements of operations and comprehensive income.

Item 4.3. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we undertook an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934, Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that such disclosure controls and procedures were effective to ensure (a) that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (b) that information required to be disclosed is accumulated and communicated to management to allow timely decisions regardingregar ding disclosure.

There were no changes in our internal controls over financial reporting during the three month ended March 31,June 30, 2010 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are not aware of any pending legal proceedings against us. We may in future be party to litigation arising in the course of our business. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial resources.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

In its amended Form 8-K filed on July 1, 2010, NextMart disclosed its strategic cooperative agreement (“Strategic Agreement”) with its shareholder Sun Media Investment Holdings Ltd. (“SMIH”) and with Redrock Land Investment Ltd. (“Redrock Land”), an affiliate of the Company major shareholder Redrock Capital Venture Ltd. (“Redrock”). As disclosed in the stated Form 8-K, we stated that the $1,000,000 unsecured loan to be provided to NextMart by Redrock Land would have bear interest at the rate of five percent (5%) per annum, among other terms. It was also disclosed that Redrock Land was a PRC registered company.

The following corrects the prior disclosure;

(i) The loan will not bear interest at 5%, rather it will be interest free, and

(ii) Redrock Land is not a PRC company, rather it is a BVI company.

Item 6. Exhibits and Reports of Form 8-K.

(a) Exhibits

31.1 Certification of Chief Executive OfficerCertifications pursuant to Section 302 of Sarbanes Oxley Act of 2002

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002